Is Platform Business Model Possible In The Kenyan Banking Market? (Part Two)

credit: Oil and Gas Photographer

I addressed some elements of Platform theory in Part One of this series. Now let's try and put together a hypothetical Platform business model that can be adopted by a Kenyan Bank.

Why Should Banks Consider This Strategic Direction?

Based on the changing environment in technology, Banks risk getting relegated to the plumbing in as far as the emergent financial services infrastructure is concerned. Let me explain.

Platforms abstract the underlying complexity in a given context to offer different sides of a market value. This has been happening for some time now. Windows and Android operating systems abstracted away hardware complexity for App developers. See below;

Windows and Android abstracting the Hardware Complexity from App developers

This phenomenon is set to hasten due to the impact the Covid 19 pandemic has on consumer behaviour(I discussed this here). It's a known fact that Banks and other financial services operators are being abstracted away by Platform operators especially in China and South-East Asia. Ant in China offers the best example of this. See Below;

Below screenshots show some examples of Platforms that have taken root in China and South East Asia.

Asian platform Super Apps: Fave, Ant, Paytm, Grab

If you come back to the local scene right here in Kenya, we are seeing the green shoots of this strategy taking hold. Platform operators Jumia Pay, Ting, PesaPal and Little are quietly building their ecosystems. (It's like they are hiding in plain sight!). Below are some screenshots of their Super Apps.

Emerging Platform Players In Kenya: Jumia Pay, Little, Ting, PesaPal

M-PESA Super App?

M-PESA leadership has also indicated that Safaricom would be launching an M-PESA Super App soon. (See linkedin posts from Sitoyo here)

Platform Business Model Canvas.

To help me craft a Platform business model, I will lean on the work done by https://platformdesigntoolkit.com/. The tool kit they propose is thorough and compelling to me. (If there are any other models out there that are interesting please let me know). The tool kit has many tools. I have however chosen to use the Platform Design Canvas tool as it has most of the elements I think are relevant to put my point across.

Source: https://platformdesigntoolkit.com/

Identify The Starting Point — Start Simple.

Most Banks have retail and business customers segments that they serve today. However, due to the fact that Banks are executing against a linear business model, they treat these two segments independently. A Bank’s core business is to optimise for deposit-taking from these two groups and lending to them. To achieve this objective, Banks build and deliver products to the consumer and business segments. (Intermediation).

These two customer segments give us an opportunity to start the journey of crafting a Platform business. The objective is to evaluate the possibility of linking these two groups so that they can exchange value between themselves.

Ecosystem Approach.

To identify areas that would link the consumer segments and business segments, a platform designer would need to perform an Ecosystem Analysis to identify the industries that the business segments play in and how customers interact with these business segments.

Platform Strategy.

The platform designer should be looking at ecosystems where consumers and businesses are trying to create and exchange value, often in sub-optimal ways. The platform designer should then find ways of helping the ecosystem unlock value with the aim of capturing part of this value.

The methods that the platform designer comes up with to unlock this value constitute a Platform Strategy.

Case Study — Insurance Ecosystem.

The example I have given below is an extremely high level one, but I hope it gets the message across.

Most Insurance companies use Banks as distribution outlets for their products. Banks, therefore, are platforms orchestrating insurance transactions between Insurance companies (Producers) and Bank customers (Consumers). The interactions that exist today in this relationship, are sub-optimal, to say the least. (That’s a topic for another day). The Insurance company, Bank consumer nexus looks like fertile ground to me as the core transaction that links consumers and Insurance companies is broken.

I have attempted to demonstrate the relationships between these three parties below.

Insurance Distribution Through A Bank

Platform Business Model Design.

The Platform business model canvas comes in handy in mapping out the Insurance Ecosystem business model and finding ways of unlocking value in the ecosystem. I have made an attempt to map this out below.

Insurance Ecosystem Platform Business Model

Core Value Proposition Design.

A platform that brings consumers and Insurance Companies together has to address some of the pain points that consumers face trying to purchase insurance.

Sign Up Pain.

The number one pain when trying to access insurance in Kenya is the signup processes one is forced to go through. The example below shows the kind of forms one would be asked to fill out.

Sign Up Solution

I have developed a rough and dirty signup flow (these are incomplete) that demonstrates how this process could change.

Landing Pages

The landing pages provide the customer with benefits that would accrue to them before they register to the platform.

Landing Pages

Sign Up Flow

The Signup flow is designed to simplify the onboarding process to the service. This is a contrast to the application forms hell one would otherwise be forced to fill out.

Sign up flow
Sign up flow

Experience Design.

Consumer Discovery Of Insurance Products.

The rough and dirty example below shows the landing page of an Insurance platform that gives consumers the ability to discover different Insurance products offered by different Insurance companies.

After-Sales Experience.

Most Insurance products today do not offer any type of engagement experience with the product once a purchase has been made. The example below shows what a purchased product (Life Insurance) would look like on the landing page.

Merchant Tools — Promotion Of Product.

The example below demonstrates the tools Insurance companies would be given to promote their products to consumers. The rough and dirty example demonstrates the ability for the Insurance companies to offer deals to the customers.

Customer Tools — Customer Ratings.

To provide customers with a way of selecting Insurance companies that offer superior service, the platform example below shows a star rating capability that would help customers discern quality companies from sub-par ones.

Value Exchange.

The example below shows payment buttons that would trigger payment workflows that would allow customers to exchange monetary value with an Insurance company for a product.

The other form of value exchange on the platform are the ratings that customers will give merchants based on the level of service offered.

Home Page: Different Insurance Products

Evolve — Going Beyond One Ecosystem.

One Platform, Many Ecosystems

Platform Ochestrating Many Ecosystems

Tackling one ecosystem is good but not enough. Some ecosystems do not have network effects and as such may not scale from a commercial perspective. An example is the Insurance Ecosystem discussed above. Insurance is a periodic product that is more often than not purchased once a year as such it doesn't offer the opportunity of building a network like say a payment product would.

Customers joining an insurance product don't create value to other customers that have purchased the product. As such, there are no network effects.

Some of the most interesting use cases of One Platform, Many Ecosystems approach have come from China and South East Asia where Platform operators have taken on whole ecosystems by deploying Super Apps.

I recommend this approach as it assures Platform operators scale and network effects which are key in driving profitability in the business.

This is a very ambitious undertaking. Platform operators need to be clear-eyed before taking on such an undertaking. Platform business models have to be developed for all the ecosystems that are chosen. The chosen ecosystems have to have good unit economics and make business sense.

Disclosure:

These are my humble observations, and I leave the door open to the fact that I could be totally wrong about different aspects of the Platform business models. Let me know what you think about Platform business models and what your unique insights are.

The opinions presented here are strictly my own and do not represent those of my employer.

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digital money design.

digital money design.

Fintech, Banking, Financial Services, Decentralised Finance, Technology.....